The mining royalty and streaming sector started 2023 robustly with the average share price during January up 5.0% – the third month in a row of positive trajectory and the best start to the year since this report has been going.
During the month, 71% of the sector experienced positive share price movements and the majors were the best-performing subset of the sector during January, up 12.4%.
Large-tiers were the next best performing subset, up 7.9% on the month. The juniors were up an average of 3.1% during January with the mid-tiers just up an average of 0.1%.
Insights from an Industry Leader:
This month we caught up with Alexandra Woodyer Sherron, CEO and president of Empress Royalty Corp (TSX-V:EMPR, OTCQB:EMPYF), a precious metals focused royalty company listed on the TSX-V.
With over 20 years of experience in the mining industry, she is a mining industry veteran who prior to joining Empress, was a successful director of structured financing for global mining finance advisory Endeavour Financial, where she was involved in over US$1.5bn of financings.
Woodyer Sherron's thoughts for what 2023 holds for the royalty sector: “We believe the royalty and streaming space will evolve in 2023 especially for the junior and mid-sized companies.
“There is a shift coming where royalty and streaming companies will provide a larger percentage of the financing to help mines get into production, especially with inflationary pressures and equity liquidity constraints.
“This will result in royalty and stream financing structures for junior mining companies becoming a more important financing option being equally considered alongside traditional equity and debt.
“As this evolves so will further and more robust consolidation among the junior and mid-sized royalty companies in an effort to create larger companies, bringing increased share liquidity and more importantly decreasing their cost of capital.”
Majors
Wheaton Precious Metals Corp (LSE:WPM, TSX:WPM, NYSE:WPM) started the year with a flurry, up an impressive 17.0% on the month (↑39.9% 3-months) despite no news flow. At present, 13 analysts are reported as covering Wheaton, 92% of those analysts rate the company as 'buy' or 'strong buy' with the average analyst price target around 17% above the current share price.
Franco-Nevada Corporation (TSX:FNV) was the worst performing major for the fourth month in a row, despite being up a healthy 7.5% on the month (↑18.7% 3-months). Franco increased its quarterly dividend by 6.25% to US$0.34 per share, effective for the full 2023 fiscal year. This is the 16th consecutive annual increase in dividend form Franco and investors who have held the shares since the company’s IPO in December 2007 now receive an effective 12.2% yield.
Discussions over the suspension of operations at the Cobre Panama mine, where Franco owns a fixed payment and floating payment stream over the mine, continue between the majority owner and operator of the project, First Quantum Minerals (TSX:FQM) and the Panamanian government, regarding a potential increase to the government's royalty payment.
While there has been no disruption to the operations yet, First Quantum will deliver a plan to put the mine under “care and maintenance” to the Government for review and the timing and impact of any care and maintenance regime enacted by the Mining Ministry remain uncertain.
Franco is expected to publish its 2022 results on 15th March 2023, after market close.
Large-tiers
Labrador Iron Ore Royalty Corp was the best performing large-tier this month, up 16.2% (↑38.2% 3-months) after Rio Tinto announced iron ore company of Canada’s (IOC) quarterly operational report for the fourth quarter ending December 31, 2022.
Labrador owns a 15.10% equity interest in IOC, and receives a 7% gross overriding royalty and a 10 cent per tonne commission on all iron ore products produced, sold and shipped by IOC. IOC had total iron ore sales in the fourth quarter of 2022 of 3.76 million tonnes, comprised of 1.76mln tonnes of pellets and 2.00 million tonnes of concentrate. LIORC will be releasing its 2022 results after the market close on March 7, 2023.
Triple Flag Precious Metals (TSX:TFPM) was the worst-performing large-tier, down 4.0% on the month (up 18.1% over three months), after being the best performer last month. During January 2023 Triple Flag completed the acquisition of Maverix Metals Inc (TSX:MMX), solidifying its position as the newest Large-Tier Mining Royalty and Streaming Company.
The combined business now holds a total of 229 assets, including 15 streams and 214 royalties. These investments are tied to mining assets at various stages of the mine life cycle, including 29 producing mines and 200 development and exploration stage projects.
Triple Flag also announced its results for the fourth quarter of 2022, during which it generated record annual revenues of approximately US$151.9 million and record metal sales of 84,571 gold equivalent ounces (“GEOs”) for full-year 2022. This is the sixth consecutive annual GEO record, translating to a 21% cumulative annual growth rate in GEOs since 2017.
Mid-tiers
With only two companies currently left in our mid-tier subset, it’s a fairly narrow field following the acquisitions of both Nomad Royalty (TSX:NSR) Company Ltd and Maverix Metals Inc by larger players. Several junior companies are growing their businesses at a rate that we would expect to see them move up into this field in due course.
Altius Minerals Corporation (TSX:ALS) was the best-performing mid-tier this month, after being the worst last month, up 0.7% (up 4.9% over three months). During January, Altius provided an update on project generation activities and its public junior equities portfolio, the market value of which was C$50.3 million, as of December 31, 2022.
During 2022, Altius made new cash-based investments that amounted to C$5.4mln and the market value (year-end basis) of shares received as part of property sales agreements totalled C$5.6 million. In 2022, an estimated 320,000 metres of drilling was completed across projects in which Altius has royalty and/or equity exposure.
Altius also published its FY 2022 results in January, reporting attributable royalty revenue of C$103.3 million, which is 23% higher than the C$83.9 million reported for 2021. Additional details relating to individual royalty performances and asset level developments will be provided with the release of full financial results, on March 7, 2023 after the close of market.
Ecora Resources PLC (LSE:ECOR, TSX:ECOR, OTCQX:ECRAF) was the worst performing mid-tier this month, down 0.5% (down 6.8% in three months) after saleable production from the Kestrel mine during Q4 2022 was impacted by reduced mining rates and operational constraints that could continue into 2023. While the volumes in the final quarter were impacted, strong pricing throughout the year resulted in a record FY22 Kestrel contribution of US$107 million, representing a 123% increase on the FY21 Kestrel contribution of US$48 million.
Ecora also published its FY 2022 trading update during January. During FY22 the portfolio contribution of US$143.1 million was up 67% on FY21 (US$85.6 million) as the portfolio benefited from stronger commodity prices for the majority of the year. Ecors expects to publish its audited full year results on 29 March 2023.
Juniors
Electric Royalties Ltd (TSX-V:ELEC, OTC:ELECF) was the best-performing junior this month and the best-performing mining royalty and streaming company over all during January, up 26.8% on the month (and 44.9% over three months) after the Ccompany elected to draw down C$1,000,000 of its convertible credit facility with Gleason & Sons LLC to fund the acquisition of a 0.75% gross revenue royalty on the producing Penouta Tin-Tantalum Mine. The Penouta Mine is located in Spain and owned by Strategic Minerals Europe Corp.
In addition to the initial royalty, Electric Royalties has a 7-month option to acquire an additional 0.75% GRR on Penouta in exchange for an additional cash payment of C$1,250,000. The respective royalty rates will be reduced to 0.5% once certain minimum royalty payments have been made.
Empress Royalty Corp (TSX-V:EMPR, OTCQB:EMPYF) was the worst-performing junior and royalty and streaming company during January, down 20.0% on the month (11.1% over three) despite upgrading its OTC listing to OTCQX from OTCQB. Empress was the second-best performing mining royalty and streaming company of 2022, so appears to be giving back some of last year’s gains.